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A Note on Shelley v. Kraemer

Commenters at The Volokh Conspiracy have been asking us for comment about the controversial case Shelley vs. Kraemer (1948). This case concerned racially restrictive (though nominally private) contracts for property transfer.

Suppose, as happened in Buchanan v. Warley, that the U.S. Supreme Court invalidated government-crafted racial zoning laws. And suppose that in response, white property owners all agreed never to sell the properties in their racially segregated neighborhood to anyone but whites. And they made private contracts to that effect.

Doesn’t this prove, the critics ask, that private means were more than adequate to keep discrimination in business?

I don’t think it proves nearly so much. Indeed, I’d turn the question around somewhat, and I’d ask the following: By what power does the federal government enforce a racially restrictive contract? It may well be that owners can write such covenants, and that they can voluntarily comply with them, but that the state might find itself powerless to enforce them. This would be a happy outcome and would square the circle of state and private discrimination, at least in this area.

As I wrote in my paper “Never a Neutral State: American Race Relations and Government Power”:

[I]t cannot be said that a restrictive covenant is a purely private act. Although the freedom of contract has long and correctly been thought central to economic liberty, this freedom is self-evidently neither absolute nor strictly private; a contract is, after all, a formal demand for state action in certain circumstances. Contracts to commit murder, or to engage in fraud, have never been valid, and this is obviously in keeping with a view of justice centered on individual rights: Although, as the legal dictum has it, ‘agreements must be kept,’ this has never been an absolute injunction. Not only would we find at the heart of these contracts an action inimical to the liberties of others, but we would also find it hypocritical that the state could be called to enforce a contract of this type while still justifying its own existence on the basis that it vindicates the rights of its citizens.

As these extreme examples show, limits on the power of government are also limits on what the government can be asked to do by private individuals, and thus even in contracts, some limits to state authority may apply. A government… that is forbidden from applying the laws unequally based on race might also be forbidden from enforcing racially restrictive covenants.

This reasoning is not without its dangers, in that it implies some redrawing of what we usually think of as the public-private divide. But it’s more or less what the Supreme Court concluded in Shelley:

These are not cases, as has been suggested, in which the States have merely abstained from action, leaving private individuals free to impose such discriminations as they see fit. Rather, these are cases in which the States have made available to such individuals the full coercive power of government to deny petitioners, on the grounds of race or color, the enjoyment of property rights…

If we’re willing to accept that state action to enforce a contract remains state action all the same, then Shelley isn’t such a leap after all, and the supposedly “private” discrimination of the racial covenant was no such thing. It was a state-enforced discriminatory action, and thus clearly impermissible.

Also from This Issue

In this month’s lead essay George Mason University professor of law David E. Bernstein argues that libertarian opposition to antidiscrimination law generally makes sense because the current notion of legally impermissible discrimination is so expansive. He writes: “To concede the general power of government to redress private discrimination through legislation would be to concede virtually unlimited power to the government.” However, Bernstein argues that libertarians can accept antidiscrimination law as long as it conforms to an appropriate limiting principle and goes on to argue that Title II of the Civil Rights Act fits the bill. “Many libertarians today, including me, think our predecessors were wrong in their blanket opposition to such laws, in part because they neglected some of the legal and historical context.”

In his reply essay, The Freeman’s Sheldon Richman drives home David Bernstein’s point “that the Southern states operated the equivalent of a ‘white supremacist cartel’ in public accommodations,” but suggests that “direct nonviolent social action” would have been superior to a legal remedy. “Social pressure – the public shaming of bigots – was working,” Richman argues. Title II was not only unnecessary, Richman says, but it shifted the focus from local nonviolent action to Washington, D.C., and laid the groundwork for further clearly unjustified legal limits on private discrimination.

In his reply to this month’s lead essay, Cato Unbound’s own Jason Kuznicki argues that “what we got from the 1964 CRA was on balance much, much less coercion. We also got a less racist society…I can’t say exactly why the 1964 CRA worked, but I suspect that Title II, as its most innovative feature, played a big part.” Not only did Title II work, Kuznicki finds it perfectly consistent with his own Hayekian ideological standards. Kuznicki then asks if Title II is Constitutional and expresses some doubts, but implores originalists to focus their energies elsewhere. “[A]dvocates of limited government have scant political capital, so let’s not squander it,” he concludes.

Harvard economist Jeffrey Miron vigorously dissents from the conclusion of David Bernstein’s lead essay. “[L]ibertarians should not only oppose Title II,” he writes, “they should shout that opposition from the highest roof tops.” Miron argues that the elements of the Civil Rights Act that targeted government discrimination would have sufficed: “[A]CRA that merely targeted government discrimination would likely have changed the social norm, allowed non-discriminatory forces to emerge, and toppled the Jim Crow regime.” The primary consequences of Title II, Miron argues, were to weaken property rights and set the stage for further interventions such as smoking bans and safety regulations, while “institutionalizing the view that blacks are too weak to overcome discrimination on their own.” Miron finds the libertarian case against Title II so strong that he is surprised to see libertarians defend it. “[I]f libertarians are supporting Title II out of political expediency, they are on a fool’s errand.”

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